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As we've discussed elsewhere, Walter Schloss was one of the most successful
investors in history, achieving a 15.7% CAGR over the 45 years
from 1956 to 2000, compared to the market’s return of 11.2%.

Highlighted by Warren
Buffett in his Super-Investors of Graham amp; Doddsvile
speech, Schloss was an arch-conservative value investor in the
Graham school. He summarized his own approach as
being: “We want to buy cheap stocks based on a small
premium over book value, usually a depressed market price, a
record that goes back at least 20 years…and one that doesn’t have
much debt.”

Factors Needed to Make Money in the Stock Market

Try to establish the value of the company. Remember
that a share of stock represents a part of a business and is not
just a piece of paper.

Use book value as a starting point to try and establish
the value of the enterprise. Be sure that debt does not equal
100% of the equity. (Capital and surplus for the common stock).

Have patience. Stocks don’t go up immediately.

Don’t buy on tips or for a quick move. Let the
professionals do that, if they can. Don’t sell on bad
news.

Don’t be afraid to be a loner but be sure that you are
correct in your judgment. You can’t be 100% certain but try to
look for the weaknesses in your thinking. Buy on a scale down and
sell on a scale up.

Have the courage of your convictions once you have made a
decision.

Have a philosophy of investment and try to follow
it. The above is a way that I’ve found successful.

Don’t be in too much of a hurry to sll. If the stock reaches
a price that you think is a fair one, then you can sell but often
because a stock goes up say 50%, people say sell it and button up
your profit. Before selling try to reevaluate the company again
and see where the stock sells in relation to its book value. Be
aware of the level of the stock market. Are yields low and P-E
rations high. If the stock market historically high. Are people
very optimistic etc?

When buying a stock, I find it helpful to buy near the
low of the past few years. A stock may go as high as
125 and then decline to 60 and you think it attractive. 3 years
before the stock sold at 20 which shows that there is some
vulnerability in it.

Try to buy assets at a discount than to buy
earnings. Earning can change dramatically in a short
time. Usually assets change slowly. One has to know much more
about a company if one buys earnings.

Listen to suggestions from people you respect. This doesn’t
mean you have to accept them. Remember it’s your money and
generally it is harder to keep money than to make it. Once you
lose a lot of money, it is hard to make it back.

Try not to let your emotions affect your judgment. Fear and
greed are probably the worst emotions to have in connection with
the purchase and sale of stocks.

Remember the work compounding. For example, if you can make
12% a year and reinvest the money back, you will double your
money in 6 yrs, taxes excluded. Remember the rule of
72. Your rate of return into 72 will tell you the number
of years to double your money.